WASHINGTON/LONDON - It was to be a swap felt around the world - a plan privately discussed by the world's largest oil exporter and the globe's biggest consumer to take the heat out of $120-plus oil prices.

In the weeks leading up to the failed June OPEC meeting, US and Saudi officials met to discuss surprising the market with an unprecedented arrangement: exchanging urgently-needed high-quality crude oil stored in the US emergency reserve for heavier, low-quality oil from Saudi Arabia, according to people familiar with the plan.

The idea involved shipping some of the light low-sulphur, or "sweet," crude out of the US Strategic Petroleum Reserve to European refiners, who needed it after the war in Libya cut off shipments of its premium crude varieties coveted for making gasoline and diesel.

In return Saudi Arabia would sell its heavier high-sulphur or "sour" crude at a discount back to the United States to top up the caverns that hold America's emergency stocks.

It was a striking suggestion, one that would have demonstrated Washington's readiness to put the SPR to extraordinary use and Riyadh's willingness to work creatively with consumers to quell high prices.

But it did not make it past the drawing board, four sources familiar with the talks confirmed. The sources disagree on which country proposed the plan. Two said it fell apart because Riyadh was not willing to subsidize European or US customers by discounting its crude prices below market value.

An Obama administration official said Washington did not see a benefit to changing the composition of the US reserves.